Atlanteknology - Technology News for Atlantic Canada

Boilerplate Clauses in agreements

In the recent case of White v. EBF Manufacturing Ltd. out of the Nova Scotia Supreme Court the Judge had to make a determination as to the rights of the Plaintiff and the Defendant under a license agreement between the parties.  The Plaintiff entered into an agreement with the Defendant giving the Defendant the exclusive licence to sell the Plaintiff's products in exchange for royalty payments to be paid to the Plaintiff.  The Plaintiff sued the Defendant when a disagreement arose with respect to the calculation of the royalty payments and when they were to be paid.  The Defendant took the position that no payments were to be made until the Plaintiff received a patent for the invention.

The Court concluded that the Plaintiff's actions in not demanding payment amounted to acceptance of the delay in making payment.

When you review and sign contracts there is generally a provision that says something to the effect that waiver (of default) must be in writing, waiver of a single occurrence of default does not constitute a continuing waiver etc.  These provisions are put into agreements to cover situations like this where one party does not specifically enforce their rights.  I have not read the case and have not seen the agreement between the parties but it would be interesting to know whether such a clause within the agreement.

These clauses, typically know as "boilerplate" clauses, do serve a purpose.  Do not ignore them.

The Alternative Investment Market?

In the most recent issue of Backbone Magazine there is an article concerning the Alternative Investment Market (AIM).  I must confess that I have not heard of it (before now) but it seems that at least some start up Canadian companies have. 

What is it?

The AIM is, for lack of a better description, the European equivalent of the NASDAQ.  It is a mechanism by which technology companies can access capital in the European market.

As recently as the first quarter of 2006 two private Canadian software companies (Excapsa Software Inc. and Sandvine Corporation) went public by listing their common shares in London on the AIM.  Neither of them have sought a stock listing in Canada.  Both of their IPO’s were vastly oversubscribed. 

There are some tax complications, which arise as a result of listing on the AIM, which can be resolved in a variety of ways the most common of which is to have the company become a mutual fund corporation (MFC).  The requirements for becoming a mutual fund corporation include:

1.    that the company must be a holding company - some sort of reorganization may be required,
2.    95% of the company's shares (by value) must be redeemable by shareholders on demand,
3.    it will be necessary to ensure that more than 50% of the MFC’s shares are held by Canadian residents at all times. 

This may sound daunting and unattractive but, for European investors, the MFC structure is not a hard sell according to Robert Brant of Lexpert Magazine.

If you are in the position to do so, it may be worthwhile to take a look at listing on the AIM as opposed to some of the more traditional stock exchanges (the TSX, the NYSE, the TSXV or the NASDAQ).

Also of importance in any decision as to what exchange to list on is the Sarbanes-Oxley Act in the USA. Ponder this statistic - of the top 25 global IPO's in 2005, only 1 took place in the USA (Businessweek magazine - May 22, 2006). In 2000, 9 of the top 10 took place in the USA.

The right to copy - how far should it go?

There has been incredible debate in recent years about the rights of consumers to copy property which is owned by someone else - be it books, music, magazines, whatever.

The users' rights side argues that intellectual property laws are somehow archaic, unfair, and need to be overhauled or repealed. They reference studies which show many people download songs/software etc from the internet and copy whatever they want from wherever they want. This article is typical. Copyright laws in the UK are "absurd, unrealistic, and unfair" because.....because 59% of people surveyed download and burn music. That is, in my opinion, somewhat like saying that we should repeal laws relating to drinking and driving if we can show that enough people do it.

One organization in the EU wants consumers to have "basic legal rights that are enforceable". Well, guess what? They do. What they do not have the right to do is make multiple copies of something and then sell/give it away to hundreds or thousands of other people over the internet or otherwise.

A more reasoned analysis is here. The article focuses on the need for solid protection of intellectual property rights to encourage economic growth. Here is a nice excerpt for those who do not want to read the whole thing:

Property rights are not only essential for freedom, but also for economic prosperity. It has been well-documented that there is a strong, positive correlation between the strength of property rights protection and the economic affluence of a country. As the world moves forward in trying to relieve international poverty and stimulate the global economy, private property rights, including intellectual property protection, is going to have to be a part of that discourse. Property is productive, and it gives incentive. IP protection spurs citizens on to creating new resources—and thereby promoting the economy.

If property is not protected, then freedom does not exist because the fundamental premise of freedom is that you are able to do what it is that you want with that which is yours...

Intellectual property rights in India

Everyone is talking about intellectual property rights protection in China. Less often one sees reports on India in this area. However, India has seen remarkable progress in the last few years in this regard and this article highlights this rather well I think.

According to the report, “[t]he number of Indian patent applications filed has increased 400% over the past 15 years. Nearly 800 Indian companies submitted international patent applications to the World Intellectual Property Organisation in 2004…more than double the number of Indian patents applied for in 2000...”

India's intellectual property legislation has been and is being overhauled and this can only mean further rapid expansion for the country in the technology field.

On Internet usage and Wi-fi

According to this story from Siliconvalley.com the on-line population in the USA has hit an all-time high of 73 percent of adults - which translates to 147 million people. So bad. Especially so when one considers that the figure was 66 percent just over a year ago.

All is not rosy however as broadband usage is still lagging. Also troubling is the fact that only 53 percent of adults in households earning less than $30,000 (USD) a year use the internet, compared with 91 percent in households with annual income exceeding $75,000.

These statistics (and remember - there are three types of lies: lies, damn lies, and statistics) may help to explain a distinctly socialistic trend in the USA to offer free (or at least inexpensive) wireless Internet access across large swathes of cities. For example, in Philadelphia Earthlink is about to go live with its citywide wi-fi project - at a cost of $20/month for retail users and $9.95/month for economically disadvantaged users.

Government driven wi-fi access is appearing elsewhere. Among other places, Suffolk County in New York State is planning on providing  free access to the Internet for the 1.5 million residents who live throughout the county's 900 square miles. In Philadelphia, city council just approved a wi-fi network which will be ready to go live in 2007.

And in the UK BT said it will install wireless networks in 12 cities in the United Kingdom, with the first of those coming online early next year. The company said deals have been reached with Birmingham, Edinburgh, Leeds, Liverpool, Cardiff, and Westminster and that deals with six other
cities were close to completion.

Maybe we in the Atlantic region should consider this (and in deed we are - or at least Fredericton is) - or the model whereby internet access is provided through powerlines...

Ignore foreign lawsuits at your peril

Here is a story that everyone should take note of - not just technology and web-based companies - I have seen this fact scenario play out in real estate transactions as well.

Facts: An Ontario company operated several websites which, for a subscription fee, offered subscribers tools which would assist in the downloading of movies from the internet. According to a judge, “In effect, the respondents conducted an Internet retail business for profit that facilitated the illegal copying and downloading of copyrighted motion pictures.”

What happened? The Ontario company got sued in the State of New York. Thinking, I suppose, that there was no connection between the plaintiff (Disney) in the USA and the company in Canada, the Canadian company ignored the lawsuit. So, the plaintiff was granted default judgment (which means essentially that they won without a fight). So, the plaintiff then sought to have the USA judgment enforced in Ontario against the Ontario company.

To make a somewhat long story short the judge in Ontario agreed to allow the USA judgment to be enforced against the Ontario company here in Canada. What does that mean? It means that Disney can now try to collect on a $500,000 judgment. Ouch.

If you want to read the case - here it is. Disney et al v. Click Enterprises.

The moral of the story is this - If someone sues you in another jurisdiction, do not assume that you cannot be touched simply because you have no presence in that jurisdiction. At the very least you should ire a local lawyer to give you advise.

The nuts and bolts (and dollars) of inventions

Tom Boyd is one of the Canadian Intellectual Property Office's (CIPO) representatives here in the Atlantic region. I was reading some of the feeds I get from various sources and noted a new article on CIPO's website which I thought was an excellent overview of the process a person should go through after they have had some sort of  brainstorm and created something interesting. I will leave it to you to read the article. I recommend it to you. It could save you some time and perhaps more importantly, some money.

China - All (or most) you need to know

There has been so much copy written about China and the protection (or lack thereof) of intellectual property rights one can hardly be blamed for running for cover every time a new one comes out.

However, I have found (saving you the trouble) a great article in BusinessWeek Online which sets out what you, the next business owner to penetrate the Great Wall, need to know about the protection of your intellectual property rights before going into battle. Written with USA laws and businesses in mind it nonetheless provides some very insight for Canadian companies.

I particularly like the story in the article about the company (one of many I suspect) that discovered a Chinese company had registered an identical trade-mark. The USA company is now forced to fight the Chinese company in a Chinese court to have the trade-mark registration expunged. Neither fast not cheap I will wager. How unfortunate.